A Look at the Structure on $SPX Cash Versus $ES Futures

The structure on cash is arguably an impulse wave because of the lack of an overlap between the orange 1 and the orange 4. That should mean we are in the 5th and final wave to complete this decline:

SPX

Now I know there’s been a lot of finger-wagging in my direction because I have been in the mood to look for this move to end (rather than to extend), but that is because I have good reason to believe this is a 5th and final wave. It’s not been fun because of the size and duration of the wave, and it’s clear that the 5th wave is extended. But they certainly by no means have to extend, and oftentimes, when market participants get very bearish, sometimes the powers that be take advantage of that, giving us a truncated 5th wave. So it has not seemed wise to expect an extreme move, at least that has been my assessment. But, as it’s turned out, calling for an extended 5th wave would have been best, but I lacked sufficient information to make that call, given the volume spike we saw, and the divergence in breadth that we see even now. So, on cash, this should be a move that is ending.

Looking at futures, a different count must be used. On this, there is an overlap (a deep one) between the 8/24 low and the high just prior to the CPI print and subsequent gap down. And so it is not likely to be an impulse wave, but rather a corrective 3-wave pattern. This is very good for the bulls. A crashy plunge would probably almost require us to be in an impulse wave and I can’t see how to make that work here.

There are two consolidations. The first looks like an ending diagonal, and that should make it a “C” wave (green in this case—of orange A), and a triangle, that should make it a “B-Wave” (of orange C).

ES

And so this, like cash, looks to be done or nearly done. In the worst case scenario, there is a fib relationship both internally and externally about 75 handles below. It is possible for us to head that low, but even if we do that, I would continue to expect a low of great significance to be forming here.


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